Family Office Series, Part III: How Are Family Offices Structured?As we noted in a previous family office series blog post, “if you’ve seen one family office, you’ve seen one family office.” There is no standard legal structure for family offices. The types and number of legal entities used in a family office differs depending on each family’s vision and goals, the family’s investment strategy, and the scope of services to be provided by the family office. There are, however, several types of family offices commonly seen in practice.

In some cases, a family office (by design or default) may begin functioning inside of a family’s operating business. In this scenario, a non-family member CFO or other trusted executive may begin handling the founder’s personal investments and financial affairs, in addition to managing the day-to-day affairs of the business. Gradually, the personal services provided by the executive may expand to other family members. There are some pitfalls associated with this approach, but in our experience, family offices often develop in this manner. If the operating business is sold or if company resources available for managing the family’s business and personal affairs are stretched too thin, the family may establish a more formal family office structure outside of the business.

The single family office (or SFO) is a family office that provides one or more services (such as investing, estate planning, tax, and philanthropy) for one family. The family members served by the family office may consist of one immediate family or several generations and multiple branches of an extended family. To the extent that the family has a shared vision and common goals for its family office, the SFO necessarily operates in complete alignment with the family—its only client.

The multiple family office (or MFO) is a business that provides family office services to multiple unrelated families. Each family pays fees to the MFO. Pricing models may include a mixture of hourly fees, fixed fees and asset-based fees, or a flat annual fee, depending on the services provided and the MFO involved. While each family must share the MFO’s resources with other unrelated families, the fixed costs for operating the MFO are spread across multiple family clients, which may result in lower expenses compared to operating an SFO. In some cases, MFOs started as SFOs and over time began managing assets for other families. Examples of SFOs that transformed into MFOs include Bessemer Trust and Rockefeller & Co.

When it comes to family offices, no one size fits all. The structure of each family office is determined by the family’s wealth and objectives, the number of family members participating in the family office, and the scope of services provided by the family office.

In our next blog post, we will examine current trends in the world of family offices.

Family Office Series, Part II: The Pros and Cons of Forming a Family OfficeA family with sufficient net worth, a shared vision for how to invest the family’s wealth, and the ability to communicate openly and resolve differences may be a good candidate to form a family office. There are a number of factors that a family should consider when deciding whether to form a family office. Here are a few of the pros and cons:


  • The family controls how the family office is structured and operated.
  • The family has flexibility and the ability to make quick decisions on investments.
  • The family office can be operated with discretion and confidentiality. Family offices are lightly regulated. Typically, family offices are not required to register with the SEC or disclose the amounts they manage and invest (as money managers with outside investors are often required to do).
  • Family members (including different branches of the family) can aggregate and leverage their wealth. This may result in more looks at better deals, the ability to attract better outside talent to help manage and invest the family’s assets, and, ultimately, higher returns.
  • The family has the ability to invest directly in deals, without investing through private equity funds and hedge funds.


  • Different family members (or branches of the family) sacrifice autonomy and independence in order to invest collectively.
  • Structuring and operating a family office can be a complicated, time consuming and expensive process.
  • There is potential for scope creep. The expectations of some family members for increasing returns and services rendered by the family office may grow over time.
  • As the family grows, there is more likelihood for disputes and imbalances of wealth between family members and different branches of the family.

While forming a family office is not the right approach for everyone, using a family office to manage and invest the family’s assets has proven to be good option for many wealthy families.

In our next blog post, we will look at how family offices are structured.

Family Office Series, Part I: What Is a Family Office?

I have a home office in my basement that I refer to as the “Smith Family Office.” Fortunately, this blog post is not about my home office.

A family office is an entity (or multiple entities) established by a wealthy family to manage its wealth and, in some cases, to provide family members with services such as tax and estate planning services, legal services and various “concierge” services. Family offices may also include a philanthropic arm for supporting the family’s charitable, social and educational interests. Family offices have existed in the United States for more than a century to manage the investments and personal affairs of wealthy families. Some family offices are established while the family still owns and manages its operating business. In other cases, a family office is established after the family sells its operating business or experiences another liquidity event.

There is a saying that “if you’ve seen one family office, you’ve seen one family office.” The structures and scopes of family offices are as different as the families they serve. Few experts can agree on a single definition of a family office, and there is no cookie cutter structure. A family office may consist of a single legal entity that invests and manages the wealth of a small group of immediate family members. Another family office may consist of multiple legal entities and trusts that invest and manage assets, provide legal, tax and estate planning services, and make charitable contributions on behalf of multiple branches and generations of a wealthy family.

Experts also disagree on how much money it takes a family to establish a family office. Many estimates range from $100 million to $1 billion of investable assets. Similarly, there is no rule on the expenses associated with running a family office. Annual operating expenses may generally range from 1.5 to 2.5 percent of assets under management. However, in smaller family offices, expenses can be higher.

The amount of the family’s investable assets, and the family’s goals and objectives, will determine, among other things:

  • how the family office is structured;
  • what services the family office provides;
  • what services are performed “in-house” (and whether those services are performed by family members or by non-family member employees); and
  • what services are outsourced to third-party investment managers, accountants and attorneys.
  • Overall, a “family office” means different things to different families based on their business, financial, investment, charitable and personal circumstances and objectives.

In our next blog post, we will explore the pros and cons of forming a family office.